Research On Institutional Environment,Directors' And Officers' Liability Insurance,and Sustainable Growth

Enterprises are an important part of the national economy.The healthy long-term development has already been vital purpose of modern enterprise.Sustainable growth is increasingly valued by companies,and today's companies are no longer just pursuing profits,but also paying increasing attention to the efficiency and quality of growth.However,due to the advancement of modern enterprise system,the phenomenon of separation of ownership and management rights has arisen.The ensuing agency problem has given managers the opportunity to damage the long-term interests of enterprises,which may affect the sustainable growth of enterprises.In order to alleviate the agency problem,enterprises need to continuously improve the level of corporate governance.As an important corporate governance tool,directors' and officers' liability insurance will affect the behavior and decision-making of senior executives,thus affecting the sustainable growth of enterprises.The research on its governance effect has formed two opposite views.One party believes that it is mainly positive,which can reduce agency costs and enhance corporate value.The other party believes that its“bottom effect”will cause executives to harm the company's interests.However,in China,the coverage rate of directors' and officers' liability insurance is low,the degree of attention needs to be improved,and the corresponding system is still not perfect.Therefore,it is more likely to induce the moral hazard of directors and officers,violating the long-term health goals of enterprise development and suppressing sustainable growth.In addition,enterprises are in a macro environment including the institutional environment.China's economic development stage is different from that of developed countries,and the institutional environment is also quite different.The governance role of directors' and officers' liability insurance is inseparable from the spirit of the contract,and is more affected by the institutional environment.A good rule of law environment will effectively help the system of the liability insurance systel.For the violations or violations of corporate executives,the law can give more timely and perfect protection,this is a very powerful constraint on the self-interest and other moral risk behaviors of executives.Therefore,when studying the relationship between the liability insurance and sustainable growth,it is necessary to analyze it in combination with different institutional environments.Therefore,this paper selects the data of China's Shanghai and Shenzhen A-share listed companies in 2008-2017,based on principal-agent theory,sustainable growth theory,external supervisor hypothesis,management incentive hypothesis,and moral hazard hypothesis of directors' and officers' liability insurance,multivariate the empirical research method of linear regression explores the relationship between directors' and officers'liability insurance as a corporate governance mechanism and the sustainable growth of enterprises,and whether this relationship will change due to the difference of external supervision under different institutional environments.The results of the study show that the purchase of directors' executive liability insurance will inhibit the sustainable growth of enterprises,but a good institutional environment can weaken this negative correlation.At the same time,this paper also carried out a series of robustness tests,and the above conclusions are still valid.To alleviate the adverse impact of directors' and officers' liability insurance on the sustainable growth of enterprises,it is necessary to constantly improve China's market mechanism and legal system and create a good macro environment.On the one hand,the research of this paper explores the governance role of directors' executive liability insurance from the perspective of sustainable growth of enterprises,and further understands the two sides of directors' and officers' liability insurance,enriching the research related to corporate sustainable growth and directors' and officers' liability insurance;On the other hand,taking into account the macro-institutional environment on which the directors' and officers' liability insurance plays a role,it provides a basis for the popularization of directors' and officers5 liability insurance in China.